Are you interested in consumer stocks, especially those with strong profit margins? Well, what if a company's profits are not matched by cash reserves to pay the bills? A profitable company that can't handle its bills today doesn't have to worry about the problems of tomorrow - because it might no be around for that much longer. Further, how is a company without cash on hand supposed to make strategic investments or acquisitions? A profitable company without liquidity can turn into a real dud in the long run. That said, today we screened for profitable consumer stocks that also have plenty of cash.
Return on Equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for consumer stocks. We then screened for businesses that have been able to maintain a sound level of profitability for shareholders (ROE [TTM]>30%)(Net Margin [TTM]>10%). From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps.
Do you think these stocks hold value that has yet to be priced in? Please use our list to assist with your own analysis.
1) ACCO Brands Corporation (ACCO)
ACCO Brands Corporation has a Return on Equity of 47.18% and Net Margin of 31.31% and Current Ratio of 6.44 and Quick Ratio of 6.44. The short interest was 78.10% as of 05/29/2012. ACCO Brands Corporation engages in the design, manufacture, marketing, and distribution of office products primarily in the United States, Australia, the United Kingdom, and Canada. The company provides traditional office products and supplies, including staplers, staples, punches, ring binders, trimmers, sheet protectors, hanging file folders, clips and fasteners, dry-erase boards, dry-erase markers, easels, bulletin boards, overhead projectors, transparencies, and laser pointers and screens under the Quartet, Rexel, Swingline, Wilson Jones, Marbig, NOBO, ACCO, Derwent, and Eastlight brads. It also offers document finishing solutions comprising binding, lamination and punching equipment, binding and lamination supplies, report covers, archival report covers, and shredders, as well as machine maintenance and repair services under the GBC brand name.
2) Monster Beverage Corporation (MNST)
|Industry:||Beverages - Soft Drinks|
Monster Beverage Corporation has a Return on Equity of 31.99% and Net Margin of 17.06% and Current Ratio of 4.46 and Quick Ratio of 3.84. The short interest was 1.31% as of 05/29/2012. Monster Beverage Corporation, through its subsidiaries, develops, markets, sells, and distributes alternative beverage category beverages in the United States and internationally. The company's Direct Store Delivery segment offers carbonated energy drinks, non-carbonated dairy based coffee plus energy drinks, carbonated energy drinks containing nitrous oxide, non-carbonated dairy based espresso plus energy drinks, non-carbonated rehydration energy drinks, energy supplements, and ready-to-drink iced teas. This segment sells its products through a distributor network.
3) The Female Health Company (FHCO)
The Female Health Company has a Return on Equity of 60.08% and Net Margin of 35.05% and Current Ratio of 2.60 and Quick Ratio of 2.37. The short interest was 5.19% as of 05/29/2012. The Female Health Company manufactures, markets, and sells consumer health care products in the United States and internationally. It offers the FC2 female condom, which provides dual protection against unintended pregnancy and sexually transmitted diseases, including HIV/AIDS. The Female Health Company sells its products to public health clinics, as well as to not-for-profit organizations.
4) Coach, Inc. (COH)
|Industry:||Textile - Apparel Footwear & Accessories|
Coach, Inc. has a Return on Equity of 53.78% and Net Margin of 21.34% and Current Ratio of 2.82 and Quick Ratio of 2.06. The short interest was 1.73% as of 05/29/2012. Coach, Inc. designs and markets accessories and gifts for women and men in the United States and internationally. It primarily offers handbags, women's and men's bag, accessories, business cases, footwear, wearables, jewelry, sunwear, travel bags, watches, and fragrance products. The company's accessories, include money pieces, wristlets, cosmetic cases, wallets, card cases, time management and electronic accessories, key rings, charms, and women's and men's belts; business cases, such as computer bags, messenger-style bags, and totes; wearables comprise jackets, sweaters, gloves, hats, and scarves; jewelry consisting of bangle bracelets, necklaces, rings, and earrings; and luggage and related accessories, such as travel kits and valet trays.
5) Sturm, Ruger & Co. Inc. (RGR)
Sturm, Ruger & Co. Inc. has a Return on Equity of 35.36% and Net Margin of 13.00% and Current Ratio of 3.08 and Quick Ratio of 2.93. The short interest was 12.74% as of 05/29/2012. Sturm, Ruger & Company, Inc. engages in the design, manufacture, and sale of firearms in the United States. It offers single-shot, autoloading, bolt-action, and sporting rifles; shotguns; rim fire autoloading and center fire autoloading pistols; and single-action and double-action revolvers. The company also manufactures and sells accessories and replacement parts for its firearms. In addition, it provides investment castings made from steel alloys directly or through manufacturers' representatives.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Google Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.